Optimal Money Market Behaviour and Sterling Interest Rates

Norbert Schnadt and John Whittaker

The Manchester School of Economic & Social Studies, 1995, vol. 63, issue 4, 368-87

Abstract: The determination of money market interest rates is studied in a model in which the magnitude, but not the timing, of a future change in the Bank of England's official lending rate is known. When the bank is expected to raise its official rate, short-term market rates may be less than the official rate as a result of the bank's willingness to lend at a range of maturities. This perverse behavior of interest rates can act against the bank's interests, and could be eliminated by a procedural change. Copyright 1995 by Blackwell Publishers Ltd and The Victoria University of Manchester

Date: 1995
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Persistent link: https://EconPapers.repec.org/RePEc:bla:manch2:v:63:y:1995:i:4:p:368-87

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